Tera Software Ltd in Focus After Securing ₹5,104 Crore Order from BSNL
Tera Software Ltd, a microcap IT company specializing in integrated IT services, is making headlines after securing a significant order worth ₹5,104 crore from Bharat Sanchar Nigam Limited (BSNL). This deal marks a crucial milestone in India’s digital infrastructure expansion and is expected to boost the company’s long-term growth prospects.
Stock Performance and Market Reaction
As of noon, shares of Tera Software Ltd were trading at ₹174.85 per share, reflecting a modest 1% increase. However, the stock hit a lower circuit due to prevailing weak market sentiments after recovering from an intraday low of ₹162.85 per share.
Tera Software Ltd has delivered multibagger returns in recent years:
- 1-year return: 173%
- 3-year return: 258%
- 5-year return: 634%
Despite short-term volatility, the company’s strong order book and consistent revenue growth indicate promising long-term potential.
About the ₹5,104 Crore Order
Tera Software Ltd, in collaboration with ITI Ltd, has signed an agreement with BSNL under the BharatNet initiative. The project focuses on designing, supplying, upgrading, operating, and maintaining the Middle Mile Network in Himachal Pradesh, West Bengal, and Andaman & Nicobar.
The primary objective is to enhance broadband connectivity in 250,000 Gram Panchayats, significantly improving rural digital accessibility. The implementation is set to begin immediately after final approvals.
Recent Developments and Legal Updates
Tera Software Ltd recently provided updates on legal matters:
- Andhra Pradesh High Court: Disposed of a writ petition and allowed a fresh assessment on an earlier order.
- GST Demand Notice: The company received a demand of ₹33.42 lakh from the Assistant Commissioner in Kolkata for discrepancies in tax filings from 2017 to 2021. Tera Software Ltd clarified that there is no material financial impact and is taking legal measures to resolve the issue.
Financial Performance
Tera Software Ltd has demonstrated strong revenue and profit growth over the past year:
| Financial Metric | Q3 FY24 | Q3 FY25 | YoY Growth |
|---|---|---|---|
| Revenue from Operations | ₹20.73 Cr | ₹23.89 Cr | +15.24% |
| Net Profit | ₹1.11 Cr | ₹2.13 Cr | +92% |
The company’s improving profitability and increasing revenues indicate a robust growth trajectory.
Company Overview
Tera Software Ltd specializes in e-governance solutions, fiber network infrastructure, and smart city technologies. Its expertise includes developing and implementing integrated IT systems for government sectors such as:
- Sales Tax Automation
- Land Registration
- Road Transport Management
- Public Distribution Systems (PDS)
With an increasing focus on last-mile connectivity and digital transformation, Tera Software Ltd is well-positioned for future growth.
Key Financial Ratios & Stock Analysis
| Metric | Value |
|---|---|
| Market Cap | ₹209 Cr |
| Current Price | ₹167 |
| 52-Week High / Low | ₹268 / ₹45.2 |
| Stock P/E | 26.5 |
| Book Value | ₹93.7 |
| Dividend Yield | 0.00% |
| ROCE (Return on Capital Employed) | 7.79% |
| ROE (Return on Equity) | 3.78% |
| Debt-to-Equity Ratio | 0.25 |
| Pledged Percentage | 18.2% |
| Industry P/E | 29.2 |
| Price-to-Book Value | 1.79 |
| Graham Number | ₹115 |
| Intrinsic Value | ₹68.6 |
| RSI (Relative Strength Index) | 20.1 (Oversold Zone) |
| EPS (Earnings Per Share) | ₹6.27 |
| 200 DMA (200-Day Moving Average) | ₹144 |
| Free Cash Flow (3 Years) | ₹11.5 Cr |
| Free Cash Flow (5 Years) | ₹-11.8 Cr |
| Total Debt | ₹28.9 Cr |
What This Means for Investors
- Strong Growth Potential: The ₹5,104 crore BSNL order enhances Tera Software Ltd’s order book and revenue visibility.
- Consistent Performance: The company has delivered multibagger returns in the past five years, making it an attractive long-term investment.
- Valuation Concerns: While the stock P/E (26.5) is slightly below the industry average (29.2), the intrinsic value of ₹68.6 suggests that the stock might be overvalued at current levels.
- Financial Stability: With a low debt-to-equity ratio of 0.25, Tera Software Ltd is financially stable, but its promoter pledge (18.2%) and low ROE (3.78%) indicate some concerns.
- Technical Indicators: The RSI of 20.1 suggests that the stock is in the oversold zone, which could lead to a potential bounce back in the near term.
Conclusion
Tera Software Ltd’s recent ₹5,104 crore order from BSNL is a game-changer, strengthening its position in India’s IT and digital infrastructure sector. While the stock has delivered exceptional returns in recent years, investors should carefully consider valuations and financial metrics before making any investment decisions.
With robust revenue growth, a strong order pipeline, and improving financial performance, Tera Software Ltd remains a stock to watch in the IT sector.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.